Correlation Between Rivian Automotive and GMS

Can any of the company-specific risk be diversified away by investing in both Rivian Automotive and GMS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Rivian Automotive and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rivian Automotive and GMS Inc, you can compare the effects of market volatilities on Rivian Automotive and GMS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Rivian Automotive with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and GMS.

Diversification Opportunities for Rivian Automotive and GMS

-0.39

Correlation Coefficient

Rivian Automotive  GMS

Very good diversification

The 3 months correlation between Rivian and GMS is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Rivian Automotive is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Rivian Automotive are associated (or correlated) with GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and GMS go up and down completely randomly.

Pair Corralation between Rivian Automotive and GMS

Given the investment horizon of 90 days Rivian Automotive is expected to generate 3.15 times less return on investment than GMS. In addition to that, Rivian Automotive is 2.5 times more volatile than GMS Inc. It trades about 0.02 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.15 per unit of volatility. If you would invest  8,245  in GMS Inc on September 9, 2024 and sell it today you would earn a total of  1,460  from holding GMS Inc or generate 17.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Rivian Automotive  vs.  GMS Inc

Rivian Automotive

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rivian Automotive is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

GMS Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rivian Automotive and GMS

The main advantage of trading using opposite Rivian Automotive and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rivian Automotive position performs unexpectedly, GMS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GMS will offset losses from the drop in GMS's long position.

The idea behind Rivian Automotive and GMS Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.